The State of the Google

First-quarter revenues strong; economic apocalypse averted.

In late February, an Internet analytics firm claimed that slightly fewer people were clicking on Google ads. Investors and analysts saw this as a sign of the end times—that perhaps even Google wasn't immune to the nation's mega-recession. Slate contributor Henry Blodget called it a "Google Disaster"; the company's previously unsinkable stock took a nose dive. But as I wrote last month, all of this teeth-gnashing was based on sketchy data. ComScore's numbers are merely an estimate, and its methodologies are opaque—a savvy investor should never use an ambiguous Web traffic report to forecast a company's growth or decline. Today's report on Google's first-quarter earnings would be the more telling announcement. Has the company really succumbed to the recession, or has it remained a mistake-proof colossus?

Definitely closer to the latter. On a conference call with investors, CEO Eric Schmidt announced a 42 percent revenue increase compared with last year's first quarter. He also—in a classic, Googlier-than-thou, above-the-fray response—told comScore to shove off. "Paid click growth has been much higher than has been speculated by third parties," Schmidt said. Compared with the first quarter of 2007, Schmidt said, "paid clicks"—simply, the number of clicks on Google ads—had increased by 20 percent.

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We can't say definitively that comScore had it all wrong. Google's figures for paid clicks include international data as opposed to comScore's strictly domestic numbers, so we can't precisely measure one company's version of events against the other's. (ComScore's reports got more bullish after its January claim of a 0.3 percent year-over-year decline; the firm reported 3 percent growth for February and 2.7 percent growth for March.) Still, the fact that we're talking about Google's earnings—that is, the fact that declining clicks did not bring about the end of life as we know it—is good evidence that those who put a lot of stock in comScore bailed too soon. Sleep well tonight, shareholders: Google will be with us for a long, long time.

The other headline from Thursday's earnings report is that 51 percent of the company's earnings came from international markets. This quarter is the first time that Google has made more than half of its money abroad. (For reference, foreign revenues were at 42 percent two years ago.) In questioning the lineup of Google bigwigs on today's call, which included founders Sergey Brin and Larry Page, investors focused on this newfound internationalism. In response to two separate questions, Schmidt held that the company's impressive growth worldwide wasn't concealing a domestic slowdown, arguing that "targeted advertising does well in most scenarios," even a recession. Another Google exec claimed that categories you'd expect to be faltering in a slow economy—cars, travel, and even mortgages—have been getting increased clicks.

Even though Google's still raking it in, there was enough bad news on Thursday for worrywarts to feed on. As Blodget noted immediately after the announcement, Google did not grow as rapidly this quarter as it has in the past, "enough to justify some of the mid-quarter concern." The investment community didn't share that concern, showing it could be just as capricious about potentially sort-of-good news as dubiously sourced sort-of-bad news. As of 8 p.m., Google stock was up $76 in after-hours trading.